Correlation Between Nike and Shoe Carnival

Can any of the company-specific risk be diversified away by investing in both Nike and Shoe Carnival at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nike and Shoe Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nike Inc and Shoe Carnival, you can compare the effects of market volatilities on Nike and Shoe Carnival and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nike with a short position of Shoe Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Shoe Carnival.

Diversification Opportunities for Nike and Shoe Carnival

-0.07

Correlation Coefficient

Nike  Shoe Carnival

Good diversification

The 3 months correlation between Nike and Shoe is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival and Nike is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nike Inc are associated (or correlated) with Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Nike i.e., Nike and Shoe Carnival go up and down completely randomly.

Pair Corralation between Nike and Shoe Carnival

Considering the 90-day investment horizon Nike Inc is expected to generate 0.89 times more return on investment than Shoe Carnival. However, Nike Inc is 1.13 times less risky than Shoe Carnival. It trades about -0.11 of its potential returns per unit of risk. Shoe Carnival is currently generating about -0.34 per unit of risk. If you would invest  7,655  in Nike Inc on December 26, 2024 and sell it today you would lose (1,081) from holding Nike Inc or give up 14.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nike Inc  vs.  Shoe Carnival

Nike Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Shoe Carnival

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoe Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Nike and Shoe Carnival

The main advantage of trading using opposite Nike and Shoe Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Shoe Carnival can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Shoe Carnival will offset losses from the drop in Shoe Carnival's long position.

The idea behind Nike Inc and Shoe Carnival pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.